Herman Miller 1st Quarter Earnings and Revenues Beat Estimates

Herman Miller, Inc. today announced results for its first quarter ended August 31, 2019. Net sales in the quarter totaled $670.9 million, an increase of 7.4% from the same quarter last fiscal year. New orders in the first quarter of $676.7 million were 6.9% above the prior year level.

On an organic basis, which excludes the impact of foreign currency translation, net sales and orders in the first quarter increased by 7.7% and 7.3%, respectively, compared to the same quarter last fiscal year.

Herman Miller reported net earnings of $0.81 per share on a diluted basis in the first quarter compared to diluted earnings per share of $0.60 in the same quarter last fiscal year. Excluding restructuring expenses and other special charges, adjusted earnings per share in the first quarter totaled $0.84 compared to adjusted earnings per share of $0.69in the first quarter of last fiscal year.

Andi Owen, President and Chief Executive Officer, stated, "Strong sales and order growth for the quarter were led by our North America and Retail businesses. Consolidated sales growth, higher gross margins and well-managed operating expenses combined to drive operating margin expansion over the same quarter last year. While there are clear opportunities for additional improvement, the enterprise at large is executing at a very high level, and we are beginning to realize meaningful benefit from our efforts to align the direction of the global business around a common set of strategic priorities."

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Consolidated gross margin in the first quarter of fiscal 2020 totaled 36.7%, representing a 70-basis point increase from the level reported in the same quarter of last fiscal year.

Operating expenses in the first quarter were $184.2 million compared to $178.0 million in the same quarter a year ago. Operating expenses included certain special charges totaling $0.4 million in the first quarter of fiscal 2020 and $5.1 million in the same quarter last year. These items in the current quarter related primarily to costs associated with the CEO transition. Excluding these items, operating expenses increased by $10.9 million compared to the same quarter last year.

The Company recognized pre-tax restructuring expense totaling $1.8 million in the first quarter. These items related primarily to restructuring actions associated with our profit improvement initiatives, including costs associated with an early retirement program in North America.

Herman Miller's effective income tax rate in the first quarter was 21.0%, compared to 20.0% in the same quarter last fiscal year.

Jeff Stutz, Chief Financial Officer, noted, "We continue to navigate the global tariff picture effectively, taking action where we can in areas around pricing and supply chain, leveraging our profit improvement initiatives and realizing benefits from lower commodity costs. Despite the gross margin pressures we are feeling in our Retail business, some of which are transitory and driven by our nearly complete transition to a new 620,000-foot distribution facility, we delivered 70 basis points of gross margin expansion at the consolidated level over the same quarter last year. Our operating performance contributed to a significant increase in earnings per share compared to last year, exceeding the expectations that we established at the start of the quarter."

The Company ended the first quarter with total cash and cash equivalents of $159.5 million. Cash flow generated from operations was $52.8 million in the current quarter compared to $32.9 million in the same quarter last fiscal year.

Segment Sales and Orders

The following tables summarize reported and organic segment sales and orders for the first quarter of fiscal 2020:

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Second Quarter Fiscal 2020 Guidance

Looking forward, Herman Miller expects net sales in the second quarter of fiscal 2020 to be in the range of $685 millionto $705 million. On an organic basis, adjusted for foreign currency translation, this forecast implies sales growth of 7% compared to the second quarter of last year at the mid-point of the range. The Company expects diluted earnings per share to range between $0.85 to $0.89.